Skip to content




Rising Tide of Sovereign Risk

Sometimes we all lose site of the forest for the trees.  In the case of sovereign risk, the trees are currently the PIGS in the Eurozone:

The PIGS go marching upward

I think it is useful to take a step back and see how sovereign risk overall, as measured by credit default swap levels on governments, has increased since the financial crisis.  The CDS levels might not have been completely accurate in 2007, but I think the magnitude of change over the last few years is indicative of the increased risk of government debt as private sector liabilities have been transferred to the public sector:

Not many countries garner investor faith...

The important question to ask is how the deteriorating credit profiles of developed countries will affect all investment classes.  As pointed out by Scott Mather of PIMCO:

In reality, peripheral Europe is distracting people from problems in the much larger developed world. And, I argue, one cannot escape sovereign debt issues simply by moving into other asset classes, because equities, real estate and all other investments will be affected if sovereign debt of a nation deteriorates.

It is an interesting dilemma for investors because there seem to be few, if any, safe havens.

Be Sociable, Share!

Posted in Markets, Politics.

Tagged with , , , , , , , , , .


2 Responses

Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.

Continuing the Discussion

  1. Tuesday links: model building | Abnormal Returns linked to this post on June 21, 2011

    [...] When sovereign credit risk reigns, there are few places to hide.  (SurlyTrader) [...]

  2. Tuesday links: model building | HOUSE linked to this post on June 21, 2011

    [...] When sovereign credit risk reigns, there are few places to hide.  (SurlyTrader) [...]



Some HTML is OK

or, reply to this post via trackback.



Get Adobe Flash player
Copyright © 2009-2013 SurlyTrader DISCLAIMER The commentary on this blog is not meant to be taken as an investment advice. The author is not a registered investment adviser. There is no substitute for your own due diligence. Please be aware that investing is inherently a risky business and if you chose to follow any of the advice on this site, then you are accepting the risks associated with that investment. The Author may have also taken positions in the stocks or investments that are being discussed and the author may change his position at any time without warning.

Yellow Pages for USA and Canada SurlyTrader - Blogged

ypblogs.com